ONE TWO FOUR ONE TWO FIVE PRINCES STREET PRIME MIXED USE INVESTMENT OPPORTUNITY EDINBURGH EH2 4AD

Transcription

1 ONE TWO FOUR ONE TWO FIVE PRINCES STREET PRIME MIXED USE INVESTMENT OPPORTUNITY EDINBURGH EH2 4AD

2 Investment Summary» A rare opportunity to acquire a prime mixed use investment in a top six UK regional city.» Edinburgh is the historic, administrative and financial capital of Scotland and one of the most prosperous cities in the UK.» Princes Street is Edinburgh s prime retailing thoroughfare and is the focal point for public transport provision in the city.» A landmark retail and office block which offers outstanding views over Princes Street Gardens and Edinburgh Castle and provides one of the outstanding large retail premises on the street.» The property provides a diverse income profile in terms of both sector and tenant exposure. 2

3 » The property is let to high quality tenants including Urban Outfitters, RICS and BDG Architecture, with a WAULT of 8.81 years.» Current total income 1,028, per annum.» A purchase at this level would represent an attractive net initial yield of 5.92% and an equivalent yield of 6.08%, increasing to a potential reversionary yield of 6.22% in May 2019 after allowing for purchaser s costs at 5.80%.» Absolute Ownership (Scottish equivalent of English Freehold).» Offers in excess of 16,420,000 (sixteen million, four hundred and twenty thousand pounds sterling) subject to contract and exclusive of VAT are invited for the Absolute Ownership in the property. 3

4 ONE TWO FOUR - ONE TWO FIVE PRINCES STREET EDINBURGH Scotland s Capital EDINBURGH, SCOTLAND S CAPITAL CITY, SITS AT THE HEART OF A DIVERSE REGIONAL ECONOMY THAT PROVIDES THE SEAT OF SCOTLAND S GOVERNMENT, IS THE HOME TO THE NATION S LEGAL SYSTEM AND IS A GLOBALLY RECOGNISED FINANCIAL CENTRE. The city has a population of approximately 490,000 people, which is predicted to grow to 600,000 people by 2033, with a regional catchment of over 1.6 million people. Edinburgh is recognised for its strength in banking, investment management and asset services. Measured by equity assets under management, the city is ranked as one of Europe s largest financial centres. In addition it has 500 billion worth of funds under management, ranking it the 11th largest hedge fund management centre in the world. The city is home to financial institutions such as Scottish Widows, Standard Life Investments, Royal Bank of Scotland, Bank of Scotland, Virgin Money and Tesco Bank. Green Investment Bank and Sainsbury Bank have also recently chosen Edinburgh as their home, further enhancing the city s reputation as a global financial centre. High value service industries account for about 86% of Edinburgh s employment. It is therefore not surprising that Edinburgh s gross value added is 1.7 times the UK average totalling 34,562. The city has a strong educational heritage, boasting four universities, providing an educational hub for over 100,000 students, including more than 16,000 international students, making it the most popular destination for overseas students wishing to study at universities in the UK after London. This in part accounts for Edinburgh s workforce being one of the most highly educated in the UK with 45.3% holding a degree or professional level qualification. Edinburgh attracts 4 million tourists per annum and is the second most visited city in the UK after London. In addition the capital is host to the world s largest annual arts festival adding an estimated 245 million to the local economy. 4

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7 ONE TWO FOUR - ONE TWO FIVE PRINCES STREET LOCATION Connected to the city EDINBURGH BENEFITS FROM EXCELLENT CONNECTIVITY AND A WORLD CLASS TRANSPORT INFRASTRUCTURE. EDINBURGH AIRPORT IS THE FIFTH LARGEST INTERNATIONAL AIRPORT IN THE UNITED KINGDOM AND IS LOCATED 8 MILES WEST OF THE CITY CENTRE. COMMUNICATIONS Edinburgh airport serves over 10 million passengers per year, with over 40 airlines offering travellers links to more than 100 worldwide destinations. Global Infrastructure Partners purchased Edinburgh Airport for 800m in The new owners have invested over 100m in new improvements and secured new deals with airlines including Qatar Airways, Virgin Atlantic and Etihad Airways. Edinburgh has two main railway stations, Waverley and Haymarket, which provide connections to all the major UK cities. Both railways stations have recently seen multi-million pound refurbishments to cope with increased passenger numbers. The city s new tram system commenced operations in May 2014 and provides a direct connection between Edinburgh Airport and York Place in the city centre with a journey time of approximately 35 minutes. Edinburgh also benefits from excellent road communications with the M8 and M9 providing access to the west, the M90 from the north and the A1/A7 from the south/south east. SITUATION The property occupies a prime location towards the western end of Princes Street with panoramic views across to Princes Street Gardens and Edinburgh Castle. Located in the heart of a strong retail pitch, the property is surrounded by brands such as New Look, Waterstones, Currys/PC World, HSBC and Phones 4 U. The attractiveness of the pitch is shown by the mobile phone operator 3 Store and the bank TSB (formerly part of Lloyds) recently taking space. The property also sits within the heart of Edinburgh s Golden Rectangle, which is the traditional office core focused around the prime streets of George Street and Princes Street and bounded by Charlotte Square to the west and St Andrew Square to the east. The property sits within the heart of Edinburgh s prime office location Golden Rectangle and at the focal point of Edinburgh s public transport network. 7

8 ONE TWO FOUR ONE TWO FIVE PRINCES STREET KEY 1 House Of Fraser 2 The Caledonian Waldorf Astoria 3 Standard Life HQ 4 Charlotte Square 5 Waterstones 6 New Look 7 HSBC 8 Debenhams 9 River Island 10 Next 11 Russell & Bromley 12 Zara 13 Hollister 14 Primark 15 French Connection 16 Jack Wills 17 Coast 8

9 Karen Millen 19 Laura Ashley 20 Carphone Warehouse 21 BHS 22 Marks & Spencer 23 Jenners 24 H&M 25 St Andrew Square 26 Harvey Nichols 27 Multrees Walk 28 John Lewis 29 St James Centre 30 Princes Mall 31 Edinburgh Castle Princes Street George Street Lothian Road Tram line Waverley Station 9

10 ONE TWO FOUR - ONE TWO FIVE PRINCES STREET PRINCES STREET Edinburgh s prime retailing thoroughfare PRINCES STREET IS THE ESTABLISHED PRIME RETAILING THOROUGHFARE IN EDINBURGH AND IS THE LOCATION FOR THE CITY S LARGEST RETAIL UNITS, ATTRACTING AN EXCELLENT BLEND OF NATIONAL AND INTERNATIONAL OCCUPIERS. Edinburgh has a primary retail catchment population of 903,000 people. The total in store comparison retail expenditure is estimated at 2.35 billion and this spending is further enhanced by a substantial tourism industry, which brings in over 1 billion annually to the city s economy. Princes Street extends over seven blocks being anchored in the west by the Caledonian Hotel and to the east by the Balmoral Hotel. The street accommodates five department stores (House of Fraser, Marks & Spencer, Debenhams, BHS and the world renowned Jenners) which provide a strong backbone and drive footfall. Over recent years Princes Street has seen several new developments attracting a number of notable new retailers to the city, taking advantage of larger, newly created and well configured units. This has enhanced the street s reputation as one of the UK s premier retailing locations. Within the central section of the street, in which the subjects are located, Urban Outfitters and New Look have taken occupation of new large stores. Primark has also rebuilt Princes Street to create a substantial flagship store. Other notable retailers on the street include Gap, Next, New Look, H&M, Russell & Bromley, River Island and Zara. Princes Street is also a popular location with office occupiers, due to the core location, proximity to public transport nodes and world class external views. Edinburgh s most recently completed Grade A office scheme, The Charlotte Square Collection, is located immediately west of the property and the Exchange Financial District, Edinburgh s principal business location, is located a short distance to the south west. 10

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12 ONE TWO FOUR Urban Outfitters Urban Outfitters One Two Five Entrance Foyer Chartered Institute of Housing 12

13 ONE TWO FOUR - ONE TWO FIVE PRINCES STREET DESCRIPTION THE PROPERTY COMPRISES A SUBSTANTIAL SEVEN STOREY BUILDING PROVIDING A PROMINENT, FLAGSHIP RETAIL UNIT AT GROUND FLOOR AND OFFICE ACCOMMODATION ON THE UPPER FLOORS. 124 PRINCES STREET (URBAN OUTFITTERS) IS ONE OF THE OUTSTANDING LARGE RETAIL UNITS ON PRINCES STREET AND WAS EXTENSIVELY REFURBISHED PRIOR TO URBAN OUTFITTERS TAKING OCCUPATION. THE UNIT IS LAID OUT OVER GROUND, BASEMENT AND MEZZANINE LEVELS AND HAS BEEN FITTED OUT IN THE TENANT S CORPORATE STYLE. 125 PRINCES STREET PROVIDES HIGH QUALITY OPEN PLAN OFFICE ACCOMMODATION WITH OUTSTANDING VIEWS OF PRINCES STREET GARDENS AND EDINBURGH CASTLE. THE OFFICE ACCOMMODATION HAS BEEN COMPREHENSIVELY REFURBISHED WITHIN THE PAST 5 YEARS AND THE SPECIFICATION INCLUDES:» Contemporary reception and office areas» Glazing on all four elevations» Raised access floors and perimeter trunking in part» VDU compatible and feature lighting» 2 x KONE 10 person passenger lifts» New male, female and disabled toilets» Showers and bicycle racks» 17 secure car parking spaces providing a generous car parking ratio of (1,379 sq ft)» Gas central heating and supplementary air conditioning 13

14 BRITISH COUNCIL FOR OFFICES AWARDS BEST REFURBISHMENT PROJECT, SCOTLAND SHORTLISTED 2013 ONE TWO FIVE RICS RICS Urban Outfitters One Two Five Common Areas 14

15 ONE TWO FOUR - ONE TWO FIVE PRINCES STREET ACCOMMODATION The subjects have been measured on a net internal basis in accordance with the RICS Code of Measuring Practice (6th Edition) and approximate areas are as follows: ONE TWO FOUR Area m ft Built frontage Net frontage Floor sq m sq ft Ground floor Sales ,413 Ground floor Storage Basement Sales ,296 Basement Storage ,864 Mezzanine Sales ,989 ONE TWO FIVE Demise Use sq m sq ft 6th floor Office ,222 5th floor Office ,940 4th floor Office ,987 3rd floor Office ,105 2nd floor Office ,727 1st floor Storage Total area 2, ,439 Total area 1, ,955 ITZA ,588 TENURE & TENANCY The property is held Absolute Ownership (Scottish equivalent of English Freehold). The property is let in accordance with the tenancy schedule set out below: Unit Floor Tenant 124 Princes Street Basement, Ground, Mezzanine URBN UK Limited Lease Start Lease Expiry Rent Review Car Parking Spaces Passing Rent per annum) NIA (sqft) Rent (psf) 15/08/09 14/08/24 15/08/19* 575, , (ZA) Comments Fixed rental increase to 600,000 per annum, from 15/08/2016. The tenant has the option to extend the lease for a period of 10 years from lease expiry, subject to 6 months notice. 125 Princes Street 125 Princes Street 125 Princes Street 125 Princes Street 125 Princes Street 125 Princes Street 125 Princes Street 125 Princes Street 2nd Vacant n/a n/a 127, , The vendor will provide a rent, rates and service charge guarantee for a period of 2 years from the date of purchase. 3rd 4th 5th & 1st (rear) Royal Institution of Chartered Surveyors Chartered Institute of Housing MBM Commercial LLP 6th BDG Architecture & Design Limited Car Parking BDG Architecture & Design Limited Car Parking MBM Commercial LLP 01/05/14 30/04/29 01/05/ , , Tenant break option 01/05/2024. Subject to 9 months written notice. 6 months rental penalty if tenant break exercised. Reduced rent of 3,000 per annum until 30 June To be topped up by vendor. 25/05/11 24/05/21 25/05/ , , At review on 25 May 2015, the rent is to be the higher of (i) passing rent and (ii) 85% of open market value. 22/08/11 21/08/26 22/08/16 82, , Tenant break options - 22/08/2016 & 22/08/2021. Subject to 6 months written notice. 1st floor storage space, 458 sq ft, rentalised at 7.50 per sq ft. 3 month rental penalty if 22/08/2016 tenant break option is exercised. 28/12/99 27/12/19 26, , Rent reduced by 2, pa until 27 December To be topped up by vendor. 28/12/99 27/12/19 2 5, /02/13 31/01/14 1 2, Car parking license now operating on a month to month basis, until terminated by 3 months notice to either party. Car Parking Vacant 10 4 clear car spaces. 6 blocked car spaces. TOTAL 17 1,028, ,394 * The rent is to be reviewed to the higher of 75% of the open market rent, or 600,000 per annum. 15

16 RAD RAD ONE TWO FOUR - ONE TWO FIVE PRINCES STREET FLOOR PLANS SIXTH LET TO BDG McCOLL FIFTH LET TO MBM COMMERCIAL FOURTH LET TO CHARTERED INSTITUTE OF HOUSING GROUND THIRD URBAN OUTFITTERS LET TO RICS BASEMENT SECOND RETAIL URBAN OUTFITTERS MEZZANINE URBAN OUTFITTERS OFFICE FIRST/CAR PARK VACANT 16

17 ONE TWO FOUR - ONE TWO FIVE PRINCES STREET TENANT PROFILE URBN UK LTD (T/A URBAN OUTFITTERS) Urban Outfitters is an American headquartered, multinational retailer operating throughout the USA and Europe. The company was founded in 1970 and now operates from over 400 locations worldwide and employs over 25,000 people globally. Urban Outfitters manages five separate brands including its namesake, Anthropologie, Free People, Terrain and BHLDN. The company has a D&B rating of 5A1 indicating a minimum risk of business failure. THE ROYAL INSTITUTION OF CHARTERED SURVEYORS RICS is an independent, professional body which regulates construction and property professionals in the UK and across the world. The institution was founded in 1868 and now has over 118,000 members globally. The company has a D&B rating of O2 which indicates a lower than average risk of business failure. MBM COMMERCIAL LLP MBM Commercial is an award-winning niche commercial legal firm which has a focus on working with investors, entrepreneurs and high growth companies. The firm provides a full range of legal services to its clients and is a limited liability partnership, with 6 partners operating from offices in Edinburgh and London. The company has a D&B rating of H2, indicating a lower than average risk of business failure. BDG ARCHITECTURE & DESIGN LIMITED BDG Architecture is an award-winning, international architecture and design consultancy focusing on strategy, architecture and design for corporate, public sector and education clients for new build, refurbishment and heritage projects. The company operates from studios in Edinburgh and London and has a D&B rating of C1, indicating a minimum risk of business failure. CHARTERED INSTITUTE OF HOUSING The Chartered Institute of Housing is a registered charity and is the professional body for those working in the housing sector in the UK. The organisation gained a Royal Charter in 1984 and has over 22,000 members worldwide. D&B rating of O1, indicating a minimum risk of business failure. INCOME PROFILE The property provides a purchaser with a weighted average unexpired lease term of 8.81 years to expiries and a diverse income profile in terms of both sector and tenant exposure. The vendor will provide a rent, rates and service charge guarantee for 2 years from the date of purchase in respect of the vacant office accommodation on the second floor. Urban Outfitters RICS Chartered Institute of Housing MBM Commercial BDG Architecture Rent Guarantee Retail Office 17

18 ASSET MANAGEMENT OPPORTUNITIES There are several asset management opportunities through which a purchaser may be able to add value, including:»» Re-letting of the vacant second floor office accommodation and use evidence created to drive office rents forward.»» Removal of MBM Commercial break options in 2016 and 2021.»» Let the vacant car parking spaces to improve income profile. EPC The EPC ratings for the property are shown in the table below. A full EPC can be provided upon request. Unit EPC Rating CO2 Emissions 124/125 C 45 18

19 VAT The property has been elected for VAT and therefore VAT will be payable on the purchase price. However, it is anticipated that the sale will be treated as a Transfer Of a Going Concern (TOGC). PROPOSAL We are instructed to seek offers in excess of 16,420,000 (sixteen million, four hundred and twenty thousand pounds sterling) subject to contract and exclusive of VAT for the Absolute Ownership in the property. A purchase at this level would reflect an attractive net initial yield of 5.92% after allowing for purchaser s costs at 5.80%. 19

20 Steven Newlands Tel: Calum Cowe Tel: Cushman & Wakefield LLP The Auction House 63A George Street Edinburgh EH2 2JG Misrepresentations Act 1967 Cushman & Wakefield, their clients and any joint agents give notice that: (i) These particulars do not form part of any offer or contract and must not be relied upon as statements or representations of fact. (ii) No person in the employment of the agents(s) has any authority to make or give representation or warranty whatever in relation to this property. (iii) Floor areas, measurements or distances given are approximate. Unless otherwise stated, any rents, or outgoings quoted are exclusive of VAT. (iv) Any descriptions given of the property cannot be taken to imply, it is in good repair, has all necessary consents, is free of contamination, or that services and facilities are in working order. Interested parties are advised 20 to carry out their own investigations as required. February 2015.